Vident Financial, the ETF issuer behind the rapidly successful Vident International Equity Fund (NasdaqGS: VIDI), introduced its second ETF today with the launch of the Vident U. S. Core Equity Fund (NasdaqGS: VUSE).
VUSE tracks the Vident Core U.S. Equity Index (VIUSX), “a strategy seeking to highlight companies which exhibiting higher levels of leadership and corporate governance and trading at attractive valuations,” according to a statement issued by Atlanta-based Vident.
VUSE qualifies as a smart beta fund, putting the new fund in one of the fastest growing segments of the ETF industry. In 2013, smart beta ETFs attracted $65.1 billion in new assets, nearly double the $34.2 billion hauled in by the group in 2012. [A Record Year of ETF Inflows]
The Vident Core U.S. Equity Index starts its selection universe with 3,000 companies with market values of at least $500 million and average daily volume of at least $1.5 million. From there, the top 80% as ranked by corporate governance, financial reporting and expense recognition are selected.
The third step in the selection process employs risk premia factors such as strong governance, higher relative quality, positive momentum and earnings quality, according to Vident. Vident then uses a risk-balance approach to sector weightings. The resulting portfolio is 500 large-, mid- and small-cap companies.
VIDI, Vident’s first ETF, launched in the fourth quarter of 2013 and already has $578.2 million in assets under management, making it one of the most successful ETF debuts of 2013.
For VIDI, Vident’s index methodology includes selecting 35 of the most liquid developed and emerging markets outside the U.S. Constituent countries are initially equal-weighted before being re-weighted to account for risk factors. [Interesting New ETFs]
The countries are evaluated across growth, sound money, political stability and value factors. VIE rebalances twice a year and “seeks to reduce country, currency, and company concentration risks that can sometimes be typical amongst traditional capitalization-weighted approaches,” according to Vident.
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